Blog:Store Wars

The hostility of the siege that has befallen the UK’s major supermarkets was upped yesterday when the Office of Fair Trading said it has referred the UK grocery market to the Competition Commission for a market investigation.

In a statement, the OFT emphasised the problems that small retail businesses face when establishing new sites. The planning regime represents a costly barrier to entry into the market, a problem that is augmented by the fact that big supermarkets have significant land holdings and, in some instances, attach restrictive covenants when selling sites, the OFT said.

The OFT also said there is evidence that the big supermarkets' buyer power has increased and that their pricing behaviour could distort competition.

So where does this leave the UK grocery landscape? Well in the short term, exactly as it is, as the Competition Commission has up to two years to conclude its investigation.

In the longer term, the rhetoric of the country’s big players so far suggests they are comfortable with what the Competition Commission investigation will find.

The inquiry has been welcomed by small businesses and convenience stores, who complain that the power of the large supermarkets is forcing them out of business. But it is difficult to see how the review will improve consumer rights.

As one banker was quoted saying today, "I can't see on what basis the current set-up does not deliver the ‘even lower prices, improved quality and choice, and continuing innovation in the market’ for consumers. We've got four 600lb gorillas knocking ten bells out of each other on price, quality, choice and convenience - from consumers' point of view it is win/win."

Where we may see some change is in the issue of planning, but again, whether this will benefit the consumer and independent retailers or just shift the balance of power among the country’s big players is unclear.

As an interesting article in today’s Guardian points out, the major supermarkets themselves are divided on the issue of planning.

“To Tesco's intense annoyance, Asda and Sainsbury's have been complaining that the market leader's huge bank of undeveloped land is a major competitive advantage,” it points out.

It is, for the first time, possible that supermarkets could be forced to sell plots of land to rivals, or even to industry newcomers. But unless changes to planning laws are well thought out, the winners may not be newcomers but some of the giants already involved in the fight.